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DC Open Doors Program Has Closed on $72 Million in Financing

by Lark Turner

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Since it began in May 2013, DC Open Doors, a program that helps qualified homebuyers make a purchase, has closed on $72 million in financing. As homebuyer assistance programs go, Open Doors is interesting because it enables people who make a healthy living (up to $123,395 annually) to buy a home, even if they haven’t been able to save up enough for a down payment.

People are responding to that opportunity with applications. The DC Housing Finance Agency’s acting director of single-family programs, Matthew Aliberti, told UrbanTurf on Thursday that Open Doors hopes to have raised $72 million to $100 million by the end of the first quarter of 2015. 266 DC buyers have closed on homes through the program so far, he said, and more than 200 of those purchases were made in 2014. More than thirty lenders now help administer the Open Doors program, Aliberti said.

“Momentum is growing,” he said. “Word is spreading among our partners and we’ve added lenders as we go.”

The program isn’t limited to first-time homebuyers. People selling their old home can purchase through the program, too, so long as they don’t own other property.

Open Doors works by giving buyers access to mortgage products that can include incentives like down payment assistance, lower mandatory down payments and lower interest rates than a buyer might normally qualify for.

“One profile of a buyer that we’ve helped is someone who can afford a monthly housing payment, but they can’t scrape up enough to pay for a down payment on a home,” Aliberti explained. Of the buyers who have purchased homes through Open Doors, about 90 percent have taken advantage of down payment assistance, he said.

In one of the loan products with down payment assistance offered by Open Doors, the mortgage covers 97 percent of the purchase price, and the remaining 3 percent is taken care of by down payment assistance. Buyers never have to make payments on the down payment assistance loan, which is forgiven after five years.

According to a 2013 presentation from the program, a renter spending $2,500 a month on a place could afford to buy a home in the $360K range. Using a Housing Finance Agency loan through Fannie Mae with a down payment assistance loan on a $364,000 house or condo, they could secure $10,920 in down payment assistance, the minimum required for the loan, finance the remaining $353,080 to get to a roughly $2,500 a month in payments, and pay only closing costs up front.

Open Doors provided UrbanTurf a more up-to-date scenario using interest rates effective as of today, November 21. Here’s a look at how Open Doors might benefit a person making $90,000 a year and hoping to purchase a home or condo valued around $300,000:

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Click to enlarge.

“But there are many scenarios,” Open Doors told us. “Buyers must be comfortable with their monthly payments, some may have other debt to consider, others may have their own down payment saved up in which case our HFA Preferred conventional loan without down payment assistance could be a better option.”

The program advises individuals to contact a lender for more information about what’s specifically available to them.

Again, buyers must make less than $123,395 in gross income to qualify for the program. There is no application process separate from working with a participating lender. The Housing Finance Agency works behind the scenes with the lender to ensure buyers qualify for the program.

The 266 people who have used the program have purchased homes across all eight wards, Aliberti said. About half have purchased single-family homes or townhouses, while the other half have purchased condos. Participants make an average of $83,000 and the homes they purchase average $287,000, though that figure ranges between $140,000 to $430,000.

“The amount of assistance we’ve been able to provide has exceeded our expectations,” Aliberti said. “We’re happy with that, especially as the market has gotten more competitive.”

See other articles related to: dc open doors

This article originally published at http://dc.urbanturf.com/articles/blog/dc_open_doors_program_has_closed_on_72_million_in_financing_so_far/9253

5 Comments

  1. skidrowedc@gmail.com said at 3:15 pm on Friday November 21, 2014:

    I hate to rain on anyone’s parade, but I honestly don’t understand what’s going on here.  So many questions. Where is the funding coming from—the Housing Trust Fund we hear about from time to time? General funds (i.e. the taxpayers)?  What is the $72M cited?  It seems to be approximately the amount of financing that the private lender participants provided ([97% loan x avg purchase price $287,000] x 266 buyers = $74M), but I can’t discern. 

    And what of these buyers?  Really, 266 is a drop in the bucket in the affordable housing crisis in DC—and some (most?) of them aren’t affordable-needs people anyway.  Doubtless they are lovely people and good neighbors, but they are also competing for scarce not-so-pricey DC properties.  In doing so, how are they not pushing the prices upward, which works against the larger goal of affordable housing?

    “Subsidized” has become an loaded word, but what else describes this situation? Perhaps “giveaway”—since “subsidized” at least suggests that the recipients are genuinely needy.  It sure appears that our government is giving gifts—ranging from $4,200 (=3% of $140,000, cited as the lowest purchase price) to $12,900 (=3% of $430,000)—with almost no strings attached.  One can’t flip, but it’s not as if five years is a serious commitment.

    I don’t doubt that, as Matthew Alberti is quoted, “Momentum is growing.”  But should this exist at all?  What do DC taxpayers (other than the 266 buyer participants) get out of this?  Exactly how is this not a give-away of taxpayer money?  Note that, beyond the 3% gifts, the taxpayers also presumably support the administrative overhead at DC-HFA.  How many people work there, serving these 266 customers?

  1. Zestious said at 6:21 pm on Friday November 21, 2014:

    @skidrowedc, This is actually a great use of taxpayer monies. The approximate cost here is calculated as follows:
    Total Sales = Average Price * Number of Customers
    Total Sales = $287,000 * 266 = $76,342,000
    Down Payment Assistance = Total Sales * Down Payment Assistance
    Down Payment Assistance = $76,342,000 * 3%
    Down Payment Assistance = $2.29 million.
    So for a mere $2.29 million, DC is able to make 266 people homeowners. That comes out to about $8,610 per person; DC will easily make that money back in increased economic activity. This is a smart program for DC as it’s allowing middle class DC families to get into homes. Lastly, the fact that the average home price is $287,000 indicates that this is targeting families who would otherwise face every rising rents.
    *My calculations don’t reflect additional overhead costs or lender incentives (as that info was not provided).

  1. skidrowedc@gmail.com said at 8:28 pm on Saturday November 22, 2014:

    @Zestious—If we focus on the economic return argument, the question is, would the return to the city be any different if someone else bought the homes in question?  I don’t think so.  There is crushing demand for lower-cost properties in DC (that’s part of the affordable housing crisis), so it’s not as if the properties in question wouldn’t be sold.  Those buyers would bring economic activity, too—but without the taxpayer subsidy.  And are you really going to aver that these non-subsidized buyers would be worse neighbors/citizens than those who took advantage of Open Door?  I’m not.

    A Facebook friend of mine who is a realtor posted a link to the article.  The essence of the his comments was “Free Money!  How can you not take advantage of this?”  Realtors—love ‘em or hate ‘em—have a way of getting to the essence of a situation.  And let’s just say that I wouldn’t describe his client base as “middle class DC families,” except in the most generous and broad sense of the phrase.

    Since I’m not seeing the economic argument, I’m left with the argument that Open Doors subsidies help those who desire or need to sail against the winds of gentrification, to the overall benefit of the city in terms of diversity, fairness, and stability.  My main problem with that is the 5 year commitment.  It’s so short, I can’t see how it would make any difference in the big picture.  The venerable affordable ownership developer Manna, Inc, for example, typically requires two to three times that commitment, in return for their buyers benefiting from a variety of subsidies.  Their stated goal is to help people build wealth, such that the subsidies are a “hand up” rather than a “handout.”  Obviously the optimal number of years is unknowable and would vary from buyer to buyer, but Manna’s system has been tested for some 30 years now and seems to strike the right balance.  A person who will commit to 10-15 years is much more likely to be a “DC person” or “DC family” in a meaningful, longterm, heartfelt way, than someone who only commits to 5 years.  Also notable is that few of Manna’s projects are open to buyers who make more than 80% of the Area Median Income (that is, who make more than about $65,000), so one understands that the subsidies are aimed at those who truly need them.  I wouldn’t be so concerned about that aspect of Open Doors (the $123,000 cutoff and $83,000 average) if the commitment were longer.  Five years, though, is nothing.  It seems like a “handout” more than a “hand up.”

  1. bob said at 3:42 am on Sunday November 23, 2014:

    @Zestious, your argument relies on the assumption those 266 people wouldn’t have become homeowners if not for this subsidy, which is surely not the case. In all likelihood the vast majority of the 266 would have become homeowners, anyways. Also, you argument assumes no other buyer exists outside of the 266. If those 266 use their subsidies to artificially induce demand and put upward pressure on the sales price - therefore pricing out other theoretical buyers - then how is that an economic benefit? The condo wouldn’t have gone vacant but for this subsidy. It simply would have been purchased by someone else at market rate instead of at inflated rate the subsidy induced.

    There is no viable economic argument for this subsidy in a market as hot as DC’s.

  1. Zestious said at 11:25 am on Monday November 24, 2014:

    @Ski,
    I agree with you that it would be better for the 5 year commitment to be extended. You are right, 5 years in not a true commitment compared to 10 or 15 years. I definitely agree with you on that. Regarding the economic argument, please see my response to bob below.
    @Bob,
    Sorry, I wasn’t clear when I said economic activities. The economic argument is that some of these buyers would not buy a home without down payment assistance. I’m not saying that a particular house wouldn’t be sold. These new buyers are now making additional home purchases, completing housing renovations, or calling a plumber or electrician (if not living in condo). It has been long studied that consumer expenditures are higher for homeowners than renters (I can post link to studies if needed). All of these economic activities would not have happened if these people did not buy a house and the city gets a “cut” from these transactions. Hopefully, this clarifies. Thanks.

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